Ex-Credit Suisse trader arrested in Britain

AP News
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Posted: Sep 27, 2012 5:49 AM
Ex-Credit Suisse trader arrested in Britain

LONDON (AP) — A former Credit Suisse executive wanted in the U.S. on fraud charges linked to distorting the value of mortgage securities during the financial crisis has been arrested in Britain, authorities said Thursday.

U.S. Federal prosecutors have alleged that Kareem Serageldin conspired with two of his employees to hide the deteriorating condition of the U.S. housing market in 2007 in order to keep the value of bonds based on subprime mortgages artificially high, thereby fattening their bonuses.

He was slated to receive more than $7 million in compensation in 2007 before the company learned about the alleged fraud and withheld $5.2 million of his pay. The fraud, which prosecutors described earlier this year as "a tale of greed run amok," was blamed as responsible for a portion of the $2.65 billion write-down Credit Suisse announced in March 2008.

Serageldin — Credit Suisse's former managing director and global head of structured credit — has been charged with conspiracy, falsifying books and records, and wire fraud in the U.S. The charges carry a potential penalty of 45 years in prison.

Two other Credit Suisse traders pleaded guilty to conspiracy charges in cooperation deals with prosecutors in February. At the time, U.S. prosecutors urged Serageldin, an American citizen living in England, to return to the U.S. and answer the charges against him.

Scotland Yard confirmed that Serageldin, 39, was taken into custody on Wednesday.

Extradition proceedings against him will begin Thursday at London's Westminster Magistrates' Court.

The subprime mortgage crisis fueled the financial meltdown in the fall of 2008 that pushed the U.S. into the most severe recession since the Great Depression of the 1930s.

U.S. federal regulators have brought civil charges against several big Wall Street firms accused of misleading investors about securities linked to risky mortgages in the years leading up to the financial crisis. The biggest settlement of the Securities and Exchange Commission's charges was with Goldman Sachs in July 2010. The firm agreed to pay $550 million.

Most of the government's cases related to banks' handling of mortgage securities in the run-up to the financial crisis have been civil proceedings, not criminal. All the cases have involved complex investments called collateralized debt obligations, securities that are backed by pools of other assets, such as mortgages.